Monday, March 14, 2011

Following the "annoucement" by Chancellor George Osborne of £50m for superfast broadband on Friday 4th March 2011 (this figure was first announced when the government's superfast broadband strategy document was published last December - see this press release), the bidding process for the second wave of Broadband Delivery UK (BDUK) projects is now underway.

The first four pilot projects were announced as part of October's Comprehensive Spending Review. This set out that "£530 million will be invested over the Spending Review period to support the UK’s broadband network and to incentivise the roll out of superfast broadband in areas that the private sector would not otherwise reach." At the same time, four pilot projects were announced, in Cumbria, Herefordshire, North Yorkshire and the Highland and Islands.

So this £50m is the second tranche of the £530m total to be made available, via a bidding process managed by BDUK, guidance for which is available here. The process is open to local bodies (tier 1 local authorities and local enterprise partnerships), which will have the prime responsibility for ensuring the appropriate delivery of broadband in their areas. Central to BDUK's approach is the development of a local broadband plan, documenting the approach to be taken and the outcomes to be achieved. In addition to developing the plan, local bodies are responsible for the following:

securing investment – from BDUK, as well as from additional public, private and European sources;

design, procurement and implementation;

ensuring the appropriate state aid approvals and clearances (with support from BDUK);

demand registration and stimulation;

monitoring outcomes and benefits realisation activities.

BDUK state in their pilot projects FAQ that "we have indicated that we will allocate £5m to £10m to each project, but the final number has yet to be decided and would be subject to a process of due diligence." So a not unreasonable assumption would be that a similar level of funding (with the above caveats) will be availble for projects successful in this second wave? BDUK's bidding guidance is silent on this, also on the number of awards to be made in this second wave ("BDUK will select a number of successful bids"), other than to say that:

"The bid for funding should sit within a BDUK advised notional grant of £60 per premise, which can be flexed to take account of factors such as topography, population density and network architecture. BDUK is currently agreeing a funding allocation approach and expects to be in a position to confirm an indicative budget for BDUK funding allocations to local bodies on submission of their bids. BDUK would also be able to provide an indicator of what type/scale of requirement its modeling suggests may be feasible, within an overall budget that includes an assumption of additional public sector funding (arranged by the local body) and private sector funding (from a successful supplier) available."

The guidance also flags the importance of securing funding additional to that being made available by BDUK:

"BDUK wishes to see local commitment to the proposed project. All bids must therefore include a local financial contribution towards the overall costs of the measures put forward. Bids must identify whether the local contribution will come from local authority sources or external partners such as health authorities as well as the private sector. They should also describe whether any local contributions are in the form of a pure capital contribution to the overall subsidy or whether they are based on guaranteed public sector demand as an ‘anchor customer’ for the project. BDUK would welcome capital contributions from local bodies towards the cost of their broadband projects based on an ‘invest to save’ business case (for example, through the achievement of lower transaction costs as a result of increased customer interaction via the web). The greater the overall contribution towards the costs (both in terms of capital and revenue funding) from local authorities and other local bodies as well as other external organisations, the more positively the bid will be considered in the assessment process."

This reinforces that the funding available through BDUK will not of itself be sufficient to provision superfast broadband; rather, it is the intention that the funding should provide a stimulus to support additional public and private investment, including from European funding sources. There is also an expectation that bidders in this round will be at an advanced stage of readiness in terms of their capacity to make use of the funding:

“Local Authorities and other Local Bodies who are considering submitting a bid as part of this award round should have already undertaken much of the preparatory groundwork to develop a Local Broadband Plan, prior to the issuing of this guidance. Key plans should be in place which have been developed in collaboration with a range of stakeholders including local communities and reflect both requirements for speed and coverage.”

Re-use of existing broadband infrastructure is also an important consideration for bidders:

“Local bodies should consider the re-use of existing public sector networks as part of the solution where they provide an efficient means of improving household connectivity. Where appropriate, local bodies should describe how they intend to use their existing investments in public sector networks as well as how partnerships with the wider public sector (for example police and health) can be used to leverage the best superfast broadband upgrades for their community.”

It's interesting to compare the bidding guidance's advice in relation to state aid with what's said in the government's strategy document, published last December. Here's what the strategy has to say:

"BDUK is working with the BIS State aid unit and engaging with the Commission to understand the scope for a UK wide State aid notification and clearance. Previously approved umbrella schemes (e.g. in Germany) appear to have been based on a fairly prescriptive and regulated framework and it remains to be seen if the level of flexibility required by the UK’s current policy of decentralisation can be made compatible with the Commission’s requirements for an umbrella approach. Since BDUK will recommend standardised commercial models and templates, local bodies taking the lead on broadband will be encouraged to innovate, and projects will be tailored and based on a range of possible commercial and delivery approaches, solutions and models to take account of specific local objectives, funding sources, etc. In the meantime and pending approval of any umbrella scheme in the UK, BDUK intends to develop a single State aid notification for the Superfast broadband pilots and to promote a more consistent approach to State aid notifications to help reduce the Commission’s case load generated by the UK. To this end, BDUK is developing a State aid template notification. This template will greatly reduce the effort and uncertainty for local bodies’ state aid notifications. BDUK will also be producing supporting guidance on key issues such as the re-use of public sector networks, and intends to provide other tools (e.g. central mapping data, recommended commercial/delivery/sourcing/ procurement models and processes), support and expertise."

In contrast, BDUK's bidding guidance states that one of the responsibilities of bidding local bodies is "managing applications for State Aid clearance, with support from BDUK", with bidders advised to consult the EU's revised state aid guidelines on broadband networks (more on state aid in this previous post), applying to the EU for clearance if necessary. The nature of the support BDUK will provide to bidders in this regard isn't specified any further in the guidance, nor is any reference made to the approaches to managing state aid issues described in the government's strategy document.

So...does this mean that the UK wide umbrella scheme and state aid template notification mentioned in the strategy document are no longer being considered? Or is it more simply that these measures won't be in place in time to support this second funding round? Or am I putting two and two together to make five here?

Local bodies intending to submit bids as part of this funding round need to inform BDUK of their intention to do so by 25th March 2011. The closing date for the submission of bids (in the form of a local broadband plan, a template for which has been provided by BDUK) is 18th April 2011, with the announcement of successful bids on 27th May 2011.

Tuesday, March 01, 2011

Following on from my previous posts about Ofcom announcements on wholesale local access and wholesale broadband access, it seemed like a good idea to take stock of where we are in terms of spectrum developments, and how these will support current and future mobile and wireless broadband services.

There have been several strands of activity over last six months or so, focusing mainly on how to deal with the network congestion created by the ever increasing use of mobile broadband, to ensure that spectrum (a finite resource) is utilised as efficiently as possible. Here’s my timeline of recent Ofcom announcements in this area:

September 2010: Ofcom publishes a statement on boosting 3G signal strengths, on the basis that “this has the potential to provide benefits for customers through improved voice capacity, data throughput and in-building signal availability by making more effective use of currently available base station technology. We believe that in practice this will have no adverse effect on the operation of services in adjacent spectrum bands.” Commentary from eWeek Europe: “The limit is to be upped by 3dBm, from 62dBm to 65dBm – meaning operators can increase the power of their transmitters from 1.5kW to 3kW. However Ofcom was actually hoping to boost the level to 68dBm to provide some future proofing, but some operators were concerned that their network infrastructure would not be able to cope with such a large jump…It is clear then that the thinking behind the idea is to help mobile operators better cope with the strain being placed on their networks, by the increasing use of smartphones.”

November 2010: Ofcom announces a one-month consultation (press release here) in relation to the potential to use white spaces, the unused spectrum between TV channels, to deliver wireless broadband services: “…the technology…could be used for a wide range of innovative applications. For example, technology manufacturers have suggested that it might wirelessly link up different devices and offer enhanced broadband access in rural areas. The technology works by searching for unused radio waves called “white spaces” between TV channels to transmit and receive wireless signals. Compared with other forms of wireless technology, such as Bluetooth and WiFi, white-space devices are being designed to use lower frequencies that have traditionally been reserved for TV. Signals at these frequencies travel further and more easily through walls.” The consultation focused on the geolcation mechanisms necessary to identify what spectrum is available where, to ensure that any new services don’t cause interference, with Ofcom proposing a “geolocation database” containing live information about which frequencies are free to use at a given location. Ofcom’s intention is that a regulatory and technical regime in place to support white space technology will be in place by the end of 2011.

January 2011: to encourage more efficient use of spectrum and better service delivery, Ofcom announces it is to open up 2G spectrum for 3G services, to provide increased coverage and higher speeds: “Ofcom has today introduced a new measure that will help mobile phone operators to increase mobile broadband speeds, deliver improved in-building coverage and widen mobile broadband coverage in rural areas. From today the airwaves used by mobile phone operators for 2G services, such as making phone calls and sending texts, will be available to provide 3G services, such as mobile internet browsing. Mobile phone operators could previously only use a limited amount of spectrum – the airwaves that mobile phones and other wireless devices use to communicate – to deliver 3G.The remainder of their spectrum holdings was licensed in the 1990s with a condition that it could only be used for 2G services – mainly voice calls and text messages. This spectrum could in future be used to meet the growing demand from smartphone devices and the like for 3G services.”

February 2011: Ofcomannounces its spectrum trading consultation, which includes proposals to optimise the efficiency of current spectrum usage and enable consolidation across operators, in relation to the 900 MHz, 1800 MHz and 2100 MHz bands:“Spectrum is of particular importance to the mobile phone and mobile broadband industry, which relies on it to carry information between customers’ handsets and mobile masts. There are 80 million mobiles in the UK and more than 12.8 million of these are smart phones, used by people to access the internet. This is placing big demands on mobile spectrum. Under the proposals, which cover spectrum at 900 MHz, 1800 MHz and 2100 MHz, operators with a greater need for spectrum will be able to make offers for spectrum from those who need it less. It is hoped that this added flexibility will help operators to respond more quickly to demand.”From the consultation document: “Spectrum is a valuable and finite resource. Its use underpins about 3% of UK GDP and is worth over £40bn a year to the economy. Spectrum trading is an important mechanism for securing its optimal use for society. Trading allows spectrum to migrate to those that can generate greater benefits for citizens and consumers. Spectrum trading promotes innovation and growth by opening up opportunities for businesses to gain access to the radio frequencies that they need. The ability to trade spectrum is therefore critical to securing maximum benefit for society…Spectrum trading enables licence holders to transfer some or all of the rights and associated obligations they hold under a licence under the Act to third parties…Generally, the more flexibility we allow in spectrum trading, the greater the potential benefits to consumers; we create a wider range of potential opportunities for trades to occur that further the efficient and optimal use of the spectrum.” Commentary from TechEye: “Over the past two decades, mobile phone companies in the UK have traditionally acquired blocks of licensed spectrum. The more spectrum an operator holds, the more telephone conversations and internet traffic it can carry over its network. However, not all operators hold the same amount of spectrum, and the level of demand for mobile services also differs from area to area. By allowing operators to trade their spectrum, Ofcom believes that there will be greater opportunities to use it more efficiently. It's also an earner for trade. Under the plan, Ofcom would act as the intermediary for spectrum trading, with the power to permit or reject trades. The consultation is set to take six weeks, and trades are expected to begin in the summer.”

Looking to the future – 4G/LTE (Long Term Evolution) services: Ofcom Chief Executive Ed Richards set out Ofcom’s timetable for the next generation of mobile services (which will operate in the 800Mhz and 2.6Ghz blocks) in a speech to the FT World Telecoms Conference in November 2010: “We aim to publish a consultation on our assessment of likely future mobile competition and detailed proposals for the combined auction, including details of any measures we propose to take to ensure effective competition, by the end of February (2011). That consultation will end in May. A statement on future competition and details of the combined auction, together with draft auction regulations, in early autumn of 2011. Final auction regulations in place before the end of 2011. Bidders’ applications invited, eligibility checks and bidding itself to commence in Q1 2012. Depending on how long bidding lasts, result known and licences issued in Q2 2012. The spectrum itself we expect to be available from the beginning of 2013. The process of release completed, we hope, by the end of 2013. Networks up and running shortly thereafter.” So, if all goes to plan, such services could potentially contribute to the government’s target for the UK to have the best superfast broadband in Europe by 2015/within the lifetime of this parliament? Especially given the speeds these new services promise? Germany was the first European country to begin a 4G auction in April 2010, closing after a month with the four existing operators dividing the available spectrum between them for a contribution of €4.4bn to the German economy.

So that’s where we are currently, which makes me wonder where all of the above leaves WiMAX? Still in the running, according to PC Pro:

“WiMAX may look to be dying off, but broadband potential could mean there's still life in the system yet, according to the company running it in the UK…Instead of opting for WiMAX, the UK’s mobile carriers are expected to move to Long Term Evolution (LTE) for the 4G services that are increasingly required to meet the data demands from smartphone users. The two technologies have been seen as rivals, but UK Broadband says WiMAX could still have a role to play in filling gaps in the UK wireless data market and be a viable broadband alternative, even if mobile phone companies choose to roll out LTE…Although LTE looks likely to be the technology of choice for internet-to-smartphone communications, the fact that even O2 - which is running trials of LTE in Slough - admits that 4G services won’t arrive in the UK for “years rather than months” suggests WiMAX might still have a window of opportunity in the UK.”

“Today Britain has one remaining license-holding WiMAX operator – UK Broadband – who has been busy over the last two years converting its wireless infrastructure from pre-WiMAX TD-CDMA technology to the latest 802.16e mobile WiMAX. The company now holds an impressive block of nationwide spectrum between 3.5GHz and 4.2GHz, along with higher frequencies for microwave backhaul. Business focus has switched away from consumer to local government, education and healthcare verticals. There is no doubt that PCCW (the Hong Kong company that wholly owns UK Broadband) executives have been studying Clearwire’s progress in the US, where indicators suggest a shift towards wholesale, leaving the consumer business to Sprint. If UK Broadband is prepared to monetize its spectrum holdings through wholesale arrangements with other carriers, and invest in sufficient infrastructure in UK cities for bandwidth-intensive business segments such as wireless CCTV and Internet connectivity for public safety and public transportation, then it stands a real chance of success with its WiMAX strategy.”

UK Broadband is now the only remaining license-holding WiMAX ISP in the country, following the closure of Freedom4 and the subsequent sale of its licensed spectrum and assets to UK Broadband, which looks like a company to keep an eye on. But what about unlicensed WiMAX services – do these still have a role to play? This article suggests that they do, while his press release from wireless vendor Proxim provides one example of how unlicensed WiMAX products are currently being used. This one illustrates how Cybermoor uses unlicensed WiMAX and this one describes the product bundles Proxim prepared to support rural broadband grant programmes in the USA and elsewhere.